Should you accept a pre-approved personal loan?

So you receive information that you are pre-approved for a personal loan. There are many questions to answer before you decide to accept the loan. Normally you will have a decent credit score for a financial institution to offer you a loan, or your credit score has just recently been upgraded. Everybody needs extra cash in their lives, but should you take the loan? Let’s ask a few questions to see if taking the loan is right for you.

Why are they offering you a pre-approved loan?

Generally speaking, you have probably recently paid off the balance of one or more credit cards and financial institutions are assuming that you have freed up your monthly budget and you can afford to take on more debt. This situation is probably true; however you may not want to immediately put yourself back in that situation. The financial institutions want you to use the money that they are offering you and are hoping that you find it beneficial to accept their loan. They have looked at your credit history and feel secure in offering you a loan.

Do you need extra cash for some expenses?

If you are in need of some extra money for a new car or some household repairs, then it may be wise to accept the loan. Just be wary not to jump on the loan for some luxuries that you would like to purchase. Many times the interest rates are higher than if you were to go to your bank and apply for a loan. In these troubled economic times it may be best not to add more debt to your financial portfolio. If you really need the cash then you probably should accept the loan, but make sure that you understand all of the terms offered and know that you can afford to add the extra monthly debt to your expenses.

How much money are they offering you?

Normally pre-approved personal loans that are not tied to a house purchase will not be an extremely substantial amount of money. Make sure you check the interest rate that is tied to the loan and if you actually require extra money, see if you can only accept a portion of the loan offered. You may be better off using your credit cards to help out with the necessities of life.

Just remember to ask yourself if you truly need the loan offered. It can be very tempting to accept a pre-approved loan, but it can be a burden.